Deferred initial RMD
A client turned 70 1/2, last year, but was still working and chose to defer the first RMD until this year. As I understand it, we have to take the first RMD by 4/1/2013 and it is still based upon the 12/31/2011 (not 12/31/2012) value because the required distribution amount was already fixed, using that date’s value. The fact that it will actually be distributed in 2013 does not mean that it used the 12/31/2012 value.
Subsequently, the 2013 RMD will have to be taken by 12/31/2013 and is based upon the actual 12/31/2012 value, and not based upon the 12/31/2012 value less the 2012 “make up ” RMD, so the 2013 RMD will be larger than it WOULD have been, had she taken the 2012 RMD in 2012, thereby reducing the 12/31/2012 value.
Do I have this right?
Permalink Submitted by Alan - IRA critic on Fri, 2013-02-08 01:09
Yes, exactly right. The 2013 RMD will be roughly 3.8% higher than it would have been had the 2012 RMD been taken in 2012. Actual year end values have been used since 2002, before that there was an adjustment of the prior year end balance to reduce it for the first year RMD deferred to the following year. This change was notable since it proves that Congress is actually capable of tax code simplification…. 🙂
Permalink Submitted by Thomas perry on Thu, 2013-02-14 21:01
I have a client age 72 who would like to move 401K over to IRA that would give him 2 IRAs.Question: Where does his RMD payment have to come from?The acount value of 401k as of Dec 31 2012.Or can we roll the money over now and take RMD from 2013 IRA.Setting up 2 IRAs so he can pull from only one using the value of both
Permalink Submitted by Alan - IRA critic on Thu, 2013-02-14 22:26
Assuming he no longer works for the sponsor of the 401k, the plan will have to hold the RMD for 2013 out of the IRA rollover. Usually, the plan would just send him a separate check for the 2013 RMD. His IRA RMD would not be affected until 2014.